BETWEEN:
2269619 ONTARIO INC.,
Appellant,
and
HER MAJESTY THE QUEEN,
Respondent.
REASONS FOR JUDGMENT
(Delivered orally from the bench on
June 22, 2016, in Toronto, Ontario.)
V.A. Miller J.
[1]
The issues raised in this appeal were whether
(1) the Appellant provided a zero-rated freight transportation service during
the period January 1, 2012 to December 31, 2013; (2) it was eligible to receive
additional Input Tax Credits of $1,245.84 for the period January 1, 2012 to
December 31, 2012; (3) it was eligible to receive Input Tax Credits of
$6,666.94 for the period January 1, 2013 to December 31, 2013.
[2]
The Appellant was represented by Ranjit Billing
who was the only witness at the hearing. Mr. Billing gave his evidence through
an interpreter.
[3]
It was clear from Mr. Billing’s evidence that
the Appellant did not file a notice of objection for the period January 1, 2013
to December 31, 2013. Consequently, the appeal of the 2013 reporting period is
not properly before me and the appeal is quashed.
Zero-rated Freight
Transportation Service
[4]
Mr. Billing had the Appellant incorporated on
January 4, 2011. In January 2011, the Appellant became a GST registrant. On
July 2, 2011 the Appellant purchased a truck.
[5]
It was Mr. Billing’s evidence that he was a
driver and he worked as a casual employee in 2011. He did not use the
Appellant’s truck in 2011 because he could not get a position as an
owner/operator of a truck.
[6]
For the period January 1 to July 10, 2012, Mr.
Billing was employed as a driver with various companies. It was his evidence
that he was employed by these companies as an employee. I note that there are
two documents included in exhibit A-10 which are pay statements for the period
prior to July 2012. It appears that the Appellant was engaged as a sub-contractor
by ASL Global Logistics for the period February 16 to 29, 2012. Mr. Billing and
not the Appellant was employed by M&M Carriers for the period June 1 to
June 15, 2012. He stated that he was employed as a driver with
M&M Carriers.
[7]
On July 10, 2012, the Appellant was engaged as
an owner/operator by Sahauli Transport Ltd. (“Sahauli”). According to a letter
tendered by Mr. Billing, he worked for Sahauli as an independent
contractor during this period July 18, 2012 to December 15, 2012. I note that
this letter was dated July 25, 2014; it was addressed “To Whom It May
Concern”; and, it was signed by “Manpreet” as Manager. It was written on a
plain piece of paper without any letterhead.
[8]
Mr. Billing stated that the Appellant was not
paid GST by Sahauli. It was his evidence that only the drivers are paid GST. He
stated that the Appellant was paid by Sahauli but this pay did not include GST
because the Appellant owned its own truck.
[9]
According to Mr. Billing, he picks up steel or
wood or whatever Sahauli tells him to pick up and he transports it to places in
the US or in Canada. Mr. Billing submitted documents which detailed the
pay received by the Appellant from Sahuali for the periods for July 18, 2012 to
December 15, 2012.
[10]
The Minister of National Revenue (the
“Minister”) assumed that the Appellant had sales of $97,243 in 2012 and that
these sales related to taxable services.
[11]
In its notice of objection, the Appellant took
the position that Mr. Billing worked as a driver from January to August 2012
and as an owner/operator from September to December 2012. In its notice of
appeal, the Appellant took the position that its services were zero-rated
because it only supplied freight transportation services from one carrier to
another. These positions are not totally consistent with the position taken by
the Appellant at this hearing.
[12]
The conditions that must be satisfied in order
for a supply to be considered zero-rated were summarized by David Sherman as
follows:
1) It has to be a “freight transportation service”, which means a
service of transporting tangible personal property as defined by subsection
1(1) of Part VII of Schedule VI;
2) The supply has to be made by a “carrier”, which is a person who
supplies a freight transportation service as defined by subsection 123(1) of
the Excise Tax Act;
3) The supply has to be made to a second “carrier”. The second carrier
must be the person who is contractually obligated to pay the first carrier;
4) The service is part of a “continuous freight movement”, which means “the transportation of tangible personal property by one or
more carriers to a destination specified by the shipper of the property, where
all freight transportation services supplied by the carriers are supplied as a
consequence of instructions given by the shipper of the property”;
5) The second carrier is neither the “shipper”, as defined by
subsection 1(1) of Part VII of Schedule VI, nor the “consignee”.
[13]
Mr. Billing’s evidence was vague and
inconsistent. The Appellant did not give sufficient evidence for me to conclude
that it was an interliner and the services it provided were zero-rated. There
was no evidence from which I could conclude that the conditions in number 3, 4
or 5 were satisfied.
[14]
I have concluded from the evidence that the
Appellant supplied services from July to December 2012 as an independent
contractor.
[15]
I have also concluded that prior to July 2012,
Mr. Billing was an employee for all period except February 16 to 29, 2012 when
the Appellant was a sub-contractor with ASL Global Logistics. As a result, the
Appellant’s sales were not $97,243 in 2012 as assessed by the Minister. I
calculate its sales to be $84,324.96 in 2012. See exhibit A-9.
Input Tax Credits
[16]
For the period January 1, 2012 to December 31,
2012 (the “2012 reporting period”), the Appellant claimed input tax credits
(“ITCs”) which totalled $2,741.32. The Minister allowed ITCs of $1,495.48.
Therefore the amount of ITCs in issue was $1,245.84. At the hearing of this
appeal, the Appellant tendered invoices which supported that it paid HST of
$902.09 in the 2012 reporting period.
[17]
There was no evidence that the amounts of HST on
the tendered invoices were included in the ITCs already allowed by the
Minister. As a result, it is my view that the Appellant is entitled to
additional ITCs of $902.09 for the 2012 reporting period.
[18]
The appeal for the 2012 reporting period is
allowed on the basis that:
a)
The Appellant’s sales for 2012 were $84,324.96;
and,
b) The Appellant is entitled to receive additional ITCs in the amount
of $902.09
[19]
The appeal for the 2013 reporting period is
quashed.
Signed at Ottawa, Canada, this 27th day
of September 2016.
“V.A. Miller”
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